# Introduction to Economics

> IB Economics Higher Level · IB Economics HL 2020+ Syllabus
> Source: https://www.owlsprep.com/study/ib-economics-hl-u1-overview/
> Weight: 8-12% of total IB Economics HL exam

This unit lays all foundational concepts for IB Economics HL, exploring how scarcity drives economic choice, introduces core analytical frameworks, and compares traditional and modern behavioural approaches to decision-making.

**Prerequisites:** No prior formal economics knowledge required

## Learning objectives

- Define core foundational concepts that underpin all subsequent IB Economics topics
- Distinguish between traditional neoclassical and modern behavioural approaches to decision-making
- Apply core analytical tools like production possibility frontiers to illustrate key economic trade-offs
- Master the introductory quantitative skills required for IB HL Economics assessment

## Unit at a Glance

This unit builds from the most fundamental question of economics—how do we satisfy unlimited wants with limited resources?—to modern frameworks that challenge traditional assumptions about human decision-making. We start with core definitions and key analytical tools, then explore both neoclassical and behavioural models of choice, ending with the introductory quantitative skills required specifically for HL assessment.

Concepts from this unit are tested across all IB Economics exam papers, appearing regularly in multiple-choice, data response, and extended response questions. Mastering these fundamentals will make every subsequent unit far easier to understand and apply.

This unit covers the following core sub-topics:
- [What is economics?](https://www.owlsprep.com/study/ib-economics-hl-u1-what-is-economics/) — Defines economics as a social science and outlines the core branches of microeconomics and macroeconomics.
- [Scarcity, choice and opportunity cost](https://www.owlsprep.com/study/ib-economics-hl-u1-scarcity-choice-and-opportunity-cost/) — Explains the core concept of scarcity, how it forces trade-offs, and how to calculate opportunity cost.
- [Production possibility frontiers](https://www.owlsprep.com/study/ib-economics-hl-u1-production-possibility-frontiers/) — Introduces the PPF model to illustrate opportunity cost, efficiency, and economic growth.
- [Positive vs normative economics](https://www.owlsprep.com/study/ib-economics-hl-u1-positive-vs-normative-economics/) — Distinguishes between factual and value-based economic statements, a key exam skill.
- [Ceteris paribus assumption](https://www.owlsprep.com/study/ib-economics-hl-u1-ceteris-paribus-assumption/) — Explains the core 'all other things equal' assumption used in all economic model building.
- [Economic growth vs development](https://www.owlsprep.com/study/ib-economics-hl-u1-economic-growth-vs-development/) — Compares the definition and measurement of economic growth and broader sustainable development.
- [Neoclassical utility maximization](https://www.owlsprep.com/study/ib-economics-hl-u1-neoclassical-utility-maximization/) — Outlines the traditional neoclassical assumption of rational utility-maximizing decision making.
- [Introduction to behavioural economics](https://www.owlsprep.com/study/ib-economics-hl-u1-introduction-to-behavioural-economics/) — Introduces the modern behavioural approach that challenges traditional rational choice assumptions.
- [Cognitive biases in decision-making](https://www.owlsprep.com/study/ib-economics-hl-u1-cognitive-biases-in-decision-making/) — Explores common cognitive biases that lead to systematic deviations from rational choice.
- [Bounded rationality and bounded self-interest](https://www.owlsprep.com/study/ib-economics-hl-u1-bounded-rationality-and-bounded-self/) — Explains key behavioural concepts of bounded rationality and bounded self-interest.
- [Introductory quantitative methods (HL only)](https://www.owlsprep.com/study/ib-economics-hl-u1-introductory-quantitative-methods/) — Covers basic graphing, percentage changes, and other quantitative skills for HL assessment.

## Common pitfalls

- **Wrong:** Confusing opportunity cost with the monetary cost of the option you choose
  - Why it fails: Opportunity cost measures the value of the next best alternative you give up, not the direct cost of your selected option
  - Correct: Always identify the next best alternative foregone when calculating or describing opportunity cost
- **Wrong:** Assuming positive statements are always 'correct' and normative statements are just 'opinion'
  - Why it fails: Positive statements are testable (not necessarily true), while normative statements are value-based (not inherently invalid)
  - Correct: Classify statements based on whether they can be proven true or false, not based on whether you agree with them
- **Wrong:** Assuming behavioural economics entirely rejects neoclassical economics
  - Why it fails: Behavioural economics adds more realistic assumptions about human behaviour to traditional models, rather than replacing them
  - Correct: Frame behavioural economics as an extension of, not a full replacement for, neoclassical core concepts

## Cheatsheet

| Concept | Core Definition |
| --- | --- |
| Opportunity Cost | Value of the next best alternative foregone when an economic choice is made |
| Production Possibility Frontier (PPF) | Graph showing maximum combinations of two goods an economy can produce with current resources and technology |
| Positive Statement | Testable, fact-based claim about how the economy actually works |
| Normative Statement | Value-based claim about what economic outcome or policy *should* be implemented |
| Ceteris Paribus | Core assumption that all other variables are held constant when analysing an economic relationship |
| Bounded Rationality | Behavioural concept that decision-makers are only partially rational, limited by information and cognitive ability |
| Opportunity Cost on PPF | The slope of the PPF equals the opportunity cost of the good plotted on the x-axis |

## What's next

Start with the first sub-topic of this unit to build the foundational knowledge you’ll need for all subsequent IB Economics HL topics. All concepts you learn here will be built on in later units, so taking time to master them now will pay off on exam day. Once you complete all sub-topics in this introduction unit, you’ll move on to the next unit covering competitive markets: demand and supply.

- [What is economics?](https://www.owlsprep.com/study/ib-economics-hl-u1-what-is-economics/)
- [Demand Theory (Unit 2 First Sub-Topic)](https://www.owlsprep.com/study/ib-economics-hl-u2-demand-theory/)
- [Scarcity, choice and opportunity cost](https://www.owlsprep.com/study/ib-economics-hl-u1-scarcity-choice-and-opportunity-cost/)

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